Impact of Changing Marijuana From Schedule 1 To Schedule 3

December 19, 2025

The recent change of marijuana from Schedule 1 to Schedule 3 is a major change to U.S. drug policy that has the potential to severely impact the fast growing $28 billion U.S. cannabiis industry.

Here are five important things you need to know

Marijuana is still not legal nationally. Rescheduling does not federally legalize recreational marijuana use. It remains a federally controlled substance. However, criminal penalties for manufacturing, distributing, and possessing Schedule III substances are typically less severe than for Schedule I substances.

Potential for increased prescription and distribution: Schedule III, substances can be lawfully prescribed as “medication” by licensed practitioners and dispensed through pharmacies, subject to state laws and provided the product has FDA approval. This opens a path for the pharmaceutical industry to develop more FDA-approved, cannabinoid-based medications.

Federal tax implications: This change represents a potentially major impact on businesses that buy/sell marijuana and derivative products. Moving from Schedule I to Schedule III means that cannabis businesses will no longer be subject to Internal Revenue Code Section 280E which currently prohibits them from deducting normal business expenses from their federal income taxes. This could significantly reduce their federal income tax burdens and allow more tax deductible business expenses. State income tax regulations, however, may not be affected.

Formal federal acknowledgment of marijuana’s potential medical value. The change in classification would ease regulatory hurdles for scientific and clinical research into marijuana’s potential benefits and risks and Increase the potential for private research and public research grants.

Unclear impact on workplace rules: The impact of the change on federally mandated workplace drug testing, especially for employees in federally regulated jobs (like the military, law enforcement. transportation, etc.) remains unclear and will depend on further updates to specific agency regulations.

In essence, the change of marijuana from Schedule1 to Schedule 3 is a significant policy shift that would align federal law more closely with evolving scientific evidence, the laws of many states and public sentiment, primarily benefiting the medical and business sectors of the cannabis industry, but it falls short of the impact of complete descheduling (complete removal from the CSA) that would be required for federal legalization.